Cost squeeze on bumper crops

Elton Robinson | Dec 20, 2005

Joe Rennicke produced his last rice crop in 2005. No, he’s not broke, or tired or getting too old. It was simply time to retire, part of a long-range plan he drew up several years ago. He’ll tie up some loose ends, keep a few pieces of equipment to keep his land in shape – land which he still owns –and maybe take a vacation.

During the USA Rice Outlook Conference in Austin, Texas, Rennicke recalled his final production season as costly, although things could have been a lot worse. Yields in 2005, “were respectable, but Hurricane Rita hurt us at the end – the last half of the crop. We had to come back in, pick it up, and we had more harvest losses than normal. And we spent a lot more time in the field burning diesel fuel.”

It’s going to be a challenge for the growers who will rent Rennicke’s 850 acres of rice near Weiner, Ark. next year – Jerry and Tom Wimpy and Herve Madden. “Fuel, fertilizer and equipment costs are going up a lot faster than the prices of the commodities,” Rennicke said.

“We’re getting caught in a cost squeeze. Government programs are probably the best thing we’ve got going for us right now, but if commodity prices don’t improve, government programs aren’t going to keep up. We need a higher price.”

To survive, Mid-South rice producers “have to achieve an economic level within their farm unit that fits for them, either shrink their size or grow their size to recover their overhead costs. Then they’re going to have to adopt new technology and go to more no-till and minimum-till. They’re going to have to get very efficient.”

Though this season has had more downs than ups, Conway, Ark., rice producer Emmet Torian, won’t be contracting rice acres in 2006. “We’re hardcore rice farmers. We don’t jump in and out. We’re set up for rice, our land is adapted for it.”

Torian, who produces about 1,200 acres of rice and 2,000 acres of soybeans, said overall rice yields were excellent in 2005, especially fields that were harvested prior to Hurricane Rita. “Afterwards, we had a lot of down rice. We were able to get it, but it was a slower process and really made us appreciate the harvest we had prior to that.”

The biggest challenge for Torian this coming season, “is to become as efficient as we can. With the energy situation, diesel fuel and urea prices, costs of inputs, we’re going to take a close look at our budgets. But our crop rotation is not going to change much.

“We may go pick up our fertilizer ourselves, to save a little on hauling costs. There may be some other little things we can do. But it’s going to be a trying year in 2006. It’s going to be a big year for rice producers. A lot of farmers are going to have to have a better price -- $5.50 soybeans and $3 rice just won’t pay the bills.”

Davis Bell, Des Arc, Ark., produced about 900 acres of rice in 2005, up about 20 percent from the previous year, “but part of that was because we picked up another farm.”

Bell’s yields “were a little better than my 5-year average and milling was down a little bit. We seem to be at the mercy of the Good Lord for the milling. The price is down, but it was down the year before.”

Bell echoed comments heard throughout the conference. “It’s just been an expensive crop .“Fertilizer costs were up. Energy costs were up. The last load of diesel fuel I bought, taxes and everything, was $3.03 a gallon. I’ve heard where some Arkansas farmers had $100 an acre tied up in irrigation costs alone. Ours was about $50 an acre.”

Bell also spent more money on weed control in 2005. “Just about everybody in central Arkansas had a tremendous amount of money tied up in grass control and still had nasty-looking rice after it was over with. I probably had the highest chemical costs ever.”

Getting the economic numbers to work for rice is more and more of a challenge every year for Bell. “If all my numbers work, I’ll be okay next year. I’ve run more paper through my adding machine than I ever have, looking at some of the decisions I’m making. But if all my numbers will work out, I’ll be okay. If fertilizer costs come down some, fuel costs come down some, I’ll be a little more profitable.”

Bell has long been a strict follower of a rotation program, but may be more selective on his rice acres in 2006. “On some of the fields that don’t produce as much rice, I may put them in corn and soybeans. And I’ll try to maximize the fields I know will be good rice fields.”

While Bell sees exploding costs of production as a blip on the radar screen, he doesn’t see costs going back to where they were. “Four years ago, I bought a transport load of diesel fuel for 38 cents a gallon. That’s not going to happen again. I see our production costs on a steady growth.

“If we could get that yield up there where it increases at the same rate as the cost of production, we’ll be okay. I’m just not sure we’re going to see that. At the same time, we have to consider what are those higher yields are doing to supply and demand.”

Bell is more worried about the profitability of young farmers. “Fortunately, I’ve been in farming for 27 years and I have a little equity to fall back on. But the sad part is that there are so many young farmers that don’t have any equity. My son just graduated from college last year and has come back to farm. Obviously, I want him to get established in farming.”

David Petter, a young rice producer from Stuttgart, Ark., will continue to stick with his rotation of two years of soybeans and one year of rice in 2006. “We have our farm set up to retain water which should cut down on some of the costs of pumping out of deep wells. We need a rain right now to start filling some of our reservoirs up.”

“The big question is when fertilizer and fuel prices level out so we can plan ahead. There is no certainty of how high those costs will go.”

Joe Heinen, Lake Charles, La., has been out of rice farming for seven years, and now owns Honeybee Ham, which markets ham and other meats during the holiday season. He drove friend and neighbor, Lenny Hensgens, a rice producer, to the conference.

“When I farmed, I had good landlords, cheap water. I would have loved to have kept going. I miss it everyday. At the time I sold out, I had interest in three cafes. We separated them and I ended up with Honeybee Ham. One store won’t make you a ton of money, but it’s a good living.

“What is different than six or seven years ago is that I see more dire straits. The marginal farmers were weeded out a long time ago. What’s left are good farmers. When the good farmers are starting to hurt, it’s getting bad.

“In the restaurant, I can only spend so much money between two walls. On a farm, the temptation to spend money is always there – to make a road straighter, put in a pipe there, take out a hill. It’s always there. It never stops.”